Saturday, January 15, 2011

Hogging the Gains from Trade

The Real Winners from US Trade and Agricultural Policies

by Timothy A Wise and Betsy Rakocy

GDAE Policy Brief 10-01 (January 2010)

In this policy brief, Timothy A Wise and Betsy Rakocy summarize the ways in which multinational livestock firms have benefited from both trade and agricultural policies. The researchers highlight the US multinational pork giant Smithfield, because Smithfield is the world's largest pork producer, it has been expanding its operations in both the United States and Mexico, and it has been implicated in significant violations of US labor law. As they show:

* Reforms in US agricultural policies gave Smithfield a steady supply of cheap feed for its hog operations, which saved the firm an estimated $2.5 billion from 1997 to 2005.

* NAFTA gave Smithfield and other livestock companies the tariff-free exports of its pork, which it could export at ten percent below production costs because of the "implicit subsidy" to its feed costs.

* NAFTA also provided a welcome investment climate in Mexico, which allowed Smithfield to expand to the point that it controls nearly one-fifth of the Mexican pork industry.

* NAFTA also gave the firm tariff-free importation of cheap feed from the United States for its Mexican operations.

* Finally, the displacement of corn and pork producers in Mexico from the flood of US imports gave Smithfield and other meatpackers a steady supply of low-wage workers, not only for its expanding Mexican operations but also for its US meatpacking plants, where a growing pool of undocumented workers allowed Smithfield to hold down wages and weaken unionization efforts.